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Pricing Liquid Petroleum Gas in Mexico

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  • Dagobert L. Brito
  • William Laney Littlejohn
  • Juan Rosellón

Abstract

This paper considers the regulation of pricing of liquid petroleum gas in Mexico. We construct a model that incorporates all information essential to the pricing question and derive relationships that should hold between prices in Mexico and prices in world markets. Prices in Mexico can be tied to the readily observable prices in the United States by a netback rule. However, this rule can lead to incentives to increase the price of domestic liquid petroleum gas by diverting production from the regulated market.

Suggested Citation

  • Dagobert L. Brito & William Laney Littlejohn & Juan Rosellón, 2000. "Pricing Liquid Petroleum Gas in Mexico," Southern Economic Journal, John Wiley & Sons, vol. 66(3), pages 742-753, January.
    • Handle: RePEc:wly:soecon:v:66:y:2000:i:3:p:742-753
    DOI: 10.1002/j.2325-8012.2000.tb00285.x
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